BUDGET – March 2021
...Covid-19 support and tax rate changes
Extending the Coronavirus Job Retention Scheme (CJRS) until the end of September 2021:
The scheme will continue to pay 80% of employees’ usual wages for the hours not worked, up to a cap of £2,500 per month, up to the end of June 2021.
For periods in July, CJRS grants will cover 70% of employees’ usual wages for the hours not worked, up to a cap of £2,187.50.
In August and September, this will then reduce to 60% of employees’ usual wages up to a cap of £1,875.
Employers will need to pay the associated Employer National Insurance contributions and pension contributions on subsidised furlough pay from their own funds. When claiming for periods from 1 May 2021 onwards, eligible employees must have been employed on 2 March 2021 and had a Real Time Information (RTI) submission to HMRC notifying a payment of earnings for that employee by their employer between 20 March 2020 and 2 March 2021.
VAT reduction for the UK’s tourism and hospitality sector:
The government is extending the temporary reduced rate of 5% VAT for goods and services supplied by the tourism and hospitality sector until 30 September 2021. To help businesses manage the transition back to the standard 20% rate, a 12.5% rate will apply for the subsequent six months until 31 March 2022.
Income Tax exemption for employer-reimbursed coronavirus antigen tests for tax year 2020-21 and 2021-22:
This measure will continue the Income Tax exemption for payments that an employer makes to an employee to reimburse for the cost of a relevant coronavirus antigen. There will be no Income Tax liability for the employee or employer.
Continuation of the home office equipment expenses COVID-19 easement for the 2021-22 tax year:
An Income Tax exemption and corresponding NICs disregard were introduced for the 2020-21 tax year. This allowed employers to reimburse employees for the cost of home office equipment deemed necessary to work from home as a result of the COVID-19 outbreak free from Income Tax and Class 1 NICs. The exemption was due to end on 5 April 2021 but will now be extended to have effect until 5 April 2022.
Taxation of payments under the self-employment income support scheme (SEISS)
Grants from the SEISS made on or after 6 April 2021 will be taxed in the year of receipt regardless of the accounting year end. Legislation in the Finance Bill will ensure this measure has effect for the tax year 2020/21 and for subsequent tax years.
A 100% tax charge can be levied on individuals who receive SEISS payments to which they are not entitled. The provisions are being extended to enable HMRC to recover payments where an individual was entitled to the grant at the time of claim but subsequently ceases to be entitled to all or part of the grant.
The SEISS will also be extended to September 2021. A fourth SEISS grant will run from 1 February to 30 April, worth 80% of three months’ average profits (capped at £7,500). This grant will be claimable from late April. A fifth grant, claimable from late July, will cover the period May to September. It will be worth 80% of three months’ average profits where the claimant’s turnover has dropped by 30% or more. Where the fall in turnover is less, the grant will be limited to 30% of profits (capped at £2,850). Eligibility for both grants will be extended to include those who were self-employed in 2019/20 and who have filed a tax return for that year.
Extended loss carry back for business:
To help otherwise-viable UK businesses which have been pushed into a loss-making position, the trading loss carry-back rule will be temporarily extended from the existing one year to three years. This will be available for both incorporated and unincorporated businesses.
Recovery loan scheme:
From 6 April 2021, a new recovery loan scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million. The scheme will be open to all businesses, including those that have already received support under the existing COVID-19 guaranteed loan schemes.
The government will provide restart grants in England of up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gyms. Local authorities in England will be given an additional £425 million of discretionary business grant funding.
Business rates reliefs:
The 100% business rates relief for eligible retail, hospitality and leisure properties in England will continue to 30 June 2021. It will be followed by 66% business rates relief from 1 July 2021 to 31 March 2022, capped at £2 million per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties. Nurseries will also qualify for relief in the same way as other eligible properties.
Tax rate changes
Personal Allowance and higher rate threshold (HRT):
The income tax Personal Allowance will increase as planned to £12,570 from April 2021 and will remain at this level until April 2026. The income tax HRT will rise as planned to £50,270 from April 2021 and will remain at this level until April 2026.
National Insurance Contributions (NIC’s):
The NIC upper earnings limit and upper profits limit will remain aligned to the HRT threshold of £50,270 for 2021/22 and through to 2025/26
The rate of Corporation Tax will increase from April 2023 to 25% on profits over £250,000. The rate for small profits under £50,000 will remain at 19% and there will be relief for businesses with profits under £250,000 so that they pay less than the main rate.
Super-deduction for investment in plant and machinery and 50% first-year allowances:
Companies investing in qualifying new plant and machinery between 1 April 2021 and 31 March 2023 will benefit from new first-year capital allowances. Investments in main-rate assets – those that qualify for 18% writing down allowance (WDA) – will be relieved by a 130% super-deduction, while investments in assets qualifying for 6%
Pensions Lifetime Allowance:
The government will maintain the Lifetime Allowance at its current level of £1,073,100 until April 2026.
Late submission and late payment of tax:
The penalty regime for VAT and income tax self-assessment (ITSA) will be made points-based, so that a financial penalty will only be issued when the relevant threshold is reached. The new late payment regime will introduce penalties proportionate to the amount of tax owed and how late the tax due is. Interest charges and repayment interest on VAT will be aligned with other tax regimes.
These reforms will come into effect for: